Every freelancer has an invoice that has gone quiet. You did the work, the client said "looks great", and now it is day 70 and the accounts team has stopped replying. If your client is an Indian business and you are registered as a micro or small enterprise, the law gives you more leverage than a polite follow-up: a 45-day payment limit and compound interest that, as of this month, runs at 17.25% a year.
The 45-day rule in plain words
The rule comes from the Micro, Small and Medium Enterprises Development Act, 2006. As this LiveLaw explainer on the Act sets out:
Section 15: a buyer must pay a micro or small supplier by the agreed date, and that agreed date cannot be more than 45 days after the goods or services are accepted. If there is no written agreement, the limit is 15 days.
Section 16: if the buyer pays late, it owes compound interest with monthly rests at three times the bank rate notified by the RBI, "notwithstanding anything contained in any agreement". A contract clause saying "no interest on delays" does not override it.
Section 17: the buyer is liable for the amount plus that interest.
So "Net 90" in a client's vendor form does not quietly become legal. If you are a registered micro or small enterprise, 45 days is the ceiling.
Why the number just went up
On 7 October 2026 the RBI raised the bank rate to 5.75%, according to its monetary policy resolution. Three times 5.75% is 17.25% a year, compounded monthly. On a ₹60,000 invoice, that works out to roughly:
₹1,740 after two months of delay
₹2,625 after three months
₹5,365 after six months
Not life-changing money. But it changes the conversation from "please pay when you can" to "here is what the delay is costing you", and finance teams notice that difference.
Does this cover freelancers?
Often, yes, with conditions. You need to be a micro or small enterprise providing services (traders are excluded) and registered on the government's Udyam portal. Registration is free and needs your PAN and Aadhaar. Since 1 April 2025, a micro enterprise is one with investment up to ₹2.5 crore and turnover up to ₹10 crore, which covers almost every solo freelancer.
Two catches worth knowing:
Register before you invoice. IIFL's guide to MSME Samadhaan lists Udyam registration obtained before issuing the invoice as an eligibility condition. Registering after a dispute starts may not help with that invoice. Do it now, for the next one.
Foreign clients are a different story. This is an Indian law with Indian enforcement. A client in Berlin will not be impressed by Section 16. For international work, your contract and payment terms are what protect you.
How to use it without burning the client
You probably do not want to drag a decent client to a tribunal. The point is to have a credible step two. Here is a sequence that keeps things civil.
Step 1: put the terms on the invoice
Add a line to every invoice: "Udyam Registration No. UDYAM-XX-00-0000000. Payment due within 30 days of acceptance. Delayed payments attract interest under Section 16 of the MSMED Act, 2006." Put the actual number in. Many clients' accounts teams prioritise MSME invoices simply because they are flagged.
Step 2: a friendly nudge after the due date
Hi Priya, a quick note that invoice #142 for ₹60,000 (accepted on 2 September) was due on 2 October. Could you check where it is in the payment run? Happy to resend it if it is stuck anywhere.
Step 3: the firm one, around day 45
Hi Priya, following up on invoice #142, now past the 45-day limit under Section 15 of the MSMED Act. As a registered micro enterprise (Udyam no. in the invoice), interest at three times the RBI bank rate applies from the due date. I would much rather sort this out between us, so could you confirm a payment date this week?
Notice the tone: factual, no threats, one clear request. You are reminding them of a rule, not declaring war.
Step 4: MSME Samadhaan, if it really comes to that
The government's MSME Samadhaan portal lets micro and small enterprises file a delayed-payment application online. It goes to the state's Micro and Small Enterprises Facilitation Council, which tries conciliation first and then arbitration. IIFL's guide lists the usual documents: your Udyam certificate, invoices, proof that the work was accepted (an approval email counts), the purchase order or agreement, bank statements and your reminder emails. The conciliation stage has a statutory target of 90 days, though real timelines vary by state.
Set yourself up before the next late payment
Register on Udyam this week if you have not.
Get acceptance in writing. "Approved, thanks!" on email is your proof that the 45-day clock started.
Agree payment terms in writing, ideally 30 days or less. Without a written agreement the limit is 15 days, which sounds great until you have to prove there was no agreement.
Keep every reminder in one email thread. It becomes your evidence file without any extra work.
Most late payers are not villains; they are disorganised, and your invoice is one of hundreds. The 45-day rule moves you up their pile. Use it as a nudge first and a lever only if you must.
General information, not legal advice. For a large or disputed amount, talk to a lawyer before filing.
